What's the deal with cash out refinancing in Texas?

Question

We are interested in a cash out refinance of our current home so we can make repairs, rent it out, and have a little cushion. I called USAA, Navy Federal and PennyMac -- each who said Texas doesn't do cash out refinancing. The internet says otherwise? I'm very confused about our options here.

Thanks!

Michael Guzik · Answer

@Stephanie Harris Welcome to BP Steph! I can't speak from experience but from what other BP members have said, and from a  conversation with my neighbor who had the same problem a year ago I will say to look for LOCAL BANKS. The big national banks will not do this, you won't be able to speak with the same person and build a relationship with them. You should be looking at Credit Human, RBFCU and Firstmark credit union as well as any other local banks you can find. Build a relationship with them that's the key! Local banks are for the little guys, the national banks really only focus on bigger more steady stuff in their comfort zone and criteria. Good luck!

Chris Mason · Answer

Staying local will always be key, doesn't matter if you're in San Antonio or Oakland.

I don't know squat about cash out refis in Texas, other than that Fannie/Freddie guidelines are riddled with "except for Texas cash out refinances, wherein..." and I don't read past the "..." b/c I'm not licensed there.

Fun fact: When I first got licensed, I thought a "Texas cash out refi" was a special type of refi, not simply a refi in Texas. Like if you go to a fast food place and it's "Except for kids, who get a free toy." I joked to myself that maybe you got a belt buckle or something if you did a "Texas cash out refi" instead of a "normal" cash out refi.

But, more serious note: Texas comes with a bunch of extra rules that only a local Texan lender will know about. So stick with a Texan...

...and demand a free belt buckle.

Account Closed · Answer

@Stephanie Harris  They are available in Texas.  Some national lenders do not like to play by Texas rules so they do not offer products here.

Kerry Baird · Answer

I was looking into this a while back, and the answer I received indicated it was due to the homestead protections in Texas.  As the lender told me, if someone were to encumber a property to the hilt and then declare bankruptcy, that person can't lose their homesteaded property.  What recourse does that lender have?

I am able to refinance my non-owner occupied properties there, but it is more difficult for owner occupied properties.

Andrew M. · Answer

@Stephanie Harris There are plenty of national and local lenders that will do a owner occupied cash out refi. Texas has some interesting rules regarding them relative to other states, and the lazier lenders won't want to cut through the red tape. Sounds like you just got unlucky with your first few tries! I have a few places that I've done just what you are looking to do, if you need referrals, please feel free to reach out.

Stephanie Harris · Answer

Hey thanks for the advice (and warm welcome)! We're going to check out RBFCU in the morning, and find out what options are available to us.

What's the deal with cash out refinancing in Texas?

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